When forming a limited liability company (LLC) in Florida, the future owners of the business must file the company’s Articles of Organization with Florida’s State Department – Division of Corporations.
Once the company is registered, the next step is to prepare a well-structured operating agreement. In this article, you will discover the most important clauses in a Florida operating agreement.
Are Operating Agreements Mandatory Under Florida Law?
Under Florida law, an operating agreement is not a mandatory requirement for an LLC. However, this document is an essential element to bind the set of rules the company’s members must adhere to and under which they must administer the business.
The Most Important Clauses in a Florida Operating Agreement – Key Elements
LLC Ownership Shares
In an LLC, the owners are referred to as “members.” When preparing an operating agreement, the members must outline the specific membership interest of each individual involved.
Unlike corporate business structures, LLCs permit members to own distinct types of membership interests, which results in different rights for members depending on their ownership interest in the company.
Upon expressly defining the ownership share of each member in the company, an LLC operating agreement must specify the types of membership interest and the membership rights associated with them.
Defining Each Member’s Responsibilities
Under Florida law, the members of an LLC have a fiduciary duty of care and loyalty to the company and its fellow members. In addition to the default statutory rules, it is good to use the company’s operating agreement to waive or modify each member’s responsibilities within the company.
Defining the LLC’s Management Structure
It is crucial to determine whether an LLC is “member-managed” or “manager-managed.” In a member-managed LLC, the company is administered by one or more of the business’s members (owners).
Conversely, a manager-managed LLC is administered by one or multiple members whose authority is designated by the members. Upon determining the company’s management structure, the document must include provisions to dictate:
- The manager’s duties and responsibility
- The management limitations imposed by the document
- What should be done in the event a legal dispute arises within the company
- The specific procedures to remove or replace a manager
Dividing Profits and Losses
No operating agreement may exist without clearly addressing the division method used by members to share the company’s profits and losses among them. Another important aspect is to define how distributions must happen, including the frequency, the amount, and other conditions associated with it.
Adding or Removing Members, Transferring a Member’s Interest and Withdrawal Clauses
If the company wants to add or remove one of the members within the LLC, the operating agreement must outline the necessary procedures to avoid legal disputes and stressful situations.
In the event one of the members of the LLC is obligated to leave the company or decides to do it voluntarily, the operating agreement must provide:
- When membership interest transfers are allowed
- How membership interest should be transferred
- What a member should do to withdraw from the company
- Conditions or restrictions on the withdrawal right
- The existence of buy-out clauses or any similar provisions
Dissolving the Company
An operating agreement must contain provisions to detail which events may trigger the LLC’s dissolution, how members should proceed to dissolve the company, how to split up the LLC’s assets and to close the company adequately.
Do You Want to Draft a Solid LLC Operating Agreement in Florida? – Immediately Contact an Expert Business Attorney
At Jurado and Associates, P.A. we have a team of well-versed lawyers to assist you throughout the process. Call us at (305) 921-0976 or send an email at Romy@juradolawfirm.com to schedule a consultation.